These 5 Tips to Recession-Proof Your B2B Business Will Help You Weather Any Economic Storm

If an economic storm is brewing, your team should be prepared—and according to the experts, a hurricane is headed our way. After two-plus years of pandemic life, and as we face overwhelming inflation, things are looking dicey.

As a veteran of tech and B2B payments, I’d like to lend a hand. Below, I share four proven strategies for teams ready to build an economic buffer and tackle this impending storm.

How to recession-proof a B2B business

1. Rethink supply chain challenges

Supply chain resilience is crucial for many businesses—manufacturers and wholesalers in particular. It’s also incredibly complicated, especially right now.

If you rely on overseas shipments, you’re probably facing sluggish turnaround and sky-high container prices (sometimes over $15,000 per container). Obviously, this makes meeting demand difficult, and impacts your bottom line.

Here are some short-term solutions.

  • Diversified suppliers. It’s dangerous to rely on one overseas supplier. Make sure you have a backup plan, and if you can, find a local source.
  • B2B marketplaces. An increasingly popular option over the last several years, B2B marketplaces are great for wholesalers, distributors, and resellers to find the best-priced products.
  • Strategic allocation. With the challenges we’re facing, you may be unable to fulfill every order—plan for this. Transparency and selective order fulfillment will go a long way.

To really recession-proof your B2B business, look for long-term solutions.

Lots of companies live by “just-in-time” ordering and manufacturing, but if you leave things to the last hour, you’re accepting additional risk. Start thinking six-plus months ahead. That said, this can come with higher spoilage and storage costs, so you’ll need to weigh that expense against the risk of coming up short.

Create a “nerve center” where emergency responses are planned and modeled so that when hurdles pop up, you know which solutions to turn to.

Identify the weakest links in your supply chain, set up controls, build reliable supplier relationships, and decide how you’ll deal with logistics interruptions.

And don’t overlook the power of tech. The right software is huge when it comes to supply chain management, and there are plenty of options that can simplify everything from sales to OEE to logistics.

2. Prioritize communication with customers

Communication should be priority number one in relationships of all kinds. B2B relationships are no exception.

Like you, your customers feel the effects of major obstacles. Be transparent about what’s happening with your company, and take time to understand the issues they face.

While you can learn a lot from your data, real conversations are an absolute must. An open, ongoing dialogue will help you establish clear expectations around fulfilling orders, clarify your commitment to working with them and providing value, and stay one step ahead of your competitors.

B2B brands that have mastered communication make their customers aware of possible supply chain issues, and encourage them to stock up in advance. Also, depending on their customers’ needs, they might offer flexible net terms, extended payment plans, or discounting.

3. Strategize for revenue growth and decrease DSO

To recession-proof your B2B business, you also need a strategy to grow your business without compromising cash flow.

In this economy, providing net terms is no longer an option, it’s a requirement. If you’re selling B2B, offering net terms of 30, 60, or 90 days is generally a must. Your customers need to be able to acquire goods on credit and make payments at their convenience. Net terms allow your customers to pay for the goods and/or services they need without tying their own funds up. If you fail to offer this option, expect your customers to turn to competitors, especially when times are tight.

Companies that do not offer any net terms will experience customer frustration, negative perceptions, and ultimately, lost sales. This can be a double-edged sword though. Offering up to a 90-day grace period can cause an increase in your days sales outstanding, or DSO. Here are some strategies to make sure offering net terms doesn’t increase your accounts receivables risk:

  • Be selective. Ensure you are only offering net terms to customers with a healthy credit and payment history. This increases the probability you will actually be paid in full on the due date.
  • Check the creditworthiness of customers. It’s important to remember that your bottom line depends on customer behavior—and customers are hard to predict. Some pay on time; some don’t.  Make sure you perform appropriate and sufficient credit checks, especially with new customers.  Mistakes can result in major losses, which we’re trying to avoid all the time, especially right now.
  • Collect payments due. Don’t let your receivables build up. Have the resources or a plan in place to follow up and collect your payments on time.

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4. Shift your focus and leverage third-party expertise

Strategic outsourcing is also crucial for small- and medium-sized B2B companies. Your team should be focused on revenue. If you can eliminate time-consuming processes—and shift their focus to your bottom line—you should. This doesn’t just liberate your team’s best talent; it reduces your need for incoming staff.

Look to replace people-driven systems with smart tech. For example, there is software for visitor management that acts as a digital, outsourced receptionist. There is a technology that helps distributors and sales teams improve operations. Solutions exist where businesses can outsource their accounts receivables and even their credit management and underwriting.  These days, software is one of the easiest ways to lighten the load—from payments, to accounts receivables, to collections, and more.

Preparation and optimization are key to recession-proofing your B2B business

When you’re facing financial hurdles, it really is time to work smart—not just hard. Preparation and optimization make all the difference in recession-proofing your B2B business, and are key to longevity and growth.

By streamlining financial ops, you’ll have one less thing to worry about, and can meet your customers where they are, while maintaining control of your risk, your business, and your cash.

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